What I am wondering is, can you edit the PXE boot menu to automatically boot an iso or img file instead of defaulting to the internal HDD? I have my all my PCs at home encrypted with diskcryptor and would like ERPXE to hand out the bootloader which can be an ISO file or IMG file.

You can create you own custom plugin with memdisk as ISO loader, just follow these instructions:
1. create a folder '/tftpboot/er/plugins/custom1'
2. copy your ISO file to '/tftpboot/er/plugins/custom1' and name it 'custom1.iso'
3. create a file in '/tftpboot/er/plugins/custom1' called 'custom1.menu' :